Supercuts 2006 Annual Report Download - page 55

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interest expenses) to drop below 1.65 on a rolling four quarter basis. At June 30, 2006, our EBITDAR to fixed charges ratio was 1.73. The
maturity date for the facility may be accelerated upon the occurrence of various events of default, including breaches of the credit agreement,
certain cross-default situations, certain bankruptcy related situations, and other customary events of default for a facility of this type. The
interest rates under the facility vary and are based on a bank’
s reference rate, the federal funds rate and/or LIBOR, as applicable, and a leverage
ratio determined by a formula tied to our debt and adjusted income.
In addition, on April 7, 2005, we issued $200.0 million of senior unsecured debt to approximately twenty purchasers via a private
placement transaction pursuant to a Master Note Purchase Agreement. The placement was split into four tranches, with $100 million maturing
March 31, 2013 and $100.0 million maturing March 31, 2015. Of the debt maturing in 2013, $30.0 million was issued as fixed rate debt with a
rate of 4.97 percent. The remaining $70.0 million was issued as variable rate debt and is priced at 0.52 percent over LIBOR. As for the $100
million maturing in 2015, $70.0 million was issued at a fixed rate of 5.20 percent, with the remaining $30.0 million issued as variable rate debt,
priced at 0.55 percent over LIBOR. All four tranches are non-amortizing and no principle payments are due until maturity. Interest payments
are due semi-annually.
The Master Note Purchase Agreement includes financial covenants and other customary terms and conditions for debt of this type. The
most restrictive of these is a fixed charge coverage ratio test, as described above. Under the terms of the Note Purchase Agreement, the
company may not allow its ratio of EBITDAR to fixed charges to drop below 1.50 on a rolling four quarter basis . The maturity date for the
debt may be accelerated upon the occurrence of various Events of Default, including breaches of the agreement, certain cross-
default situations,
certain bankruptcy related situations, and other customary events of default for debt of this type.
In anticipation of our new Master Note Purchase Agreement discussed above, we entered into a First Amendment to Note Purchase
Agreement with respect to an existing Note Purchase Agreement dated as of March 1, 2002. We closed on the amendment on April 7, 2005.
The amendment modified certain financial covenants so that they would be more consistent with the financial covenants in the new Master
Note Purchase Agreement.
Fiscal Year 2004
In the second quarter of fiscal year 2004, we entered into an $11.9 million term loan related to our Salt Lake City Distribution Center. The
loan has a rate of 7.16 percent and matures in November of fiscal year 2011.
Acquisitions
Acquisitions are discussed throughout Management’s Discussion and Analysis in this Item 7, as well as in Note 3 to the Consolidated
Financial Statements in Part II, Item 8 of this Form 10-K. The most significant of these acquisitions relates to the purchase of the hair
restoration centers; refer to Note 3 of the Consolidated Financial Statements for related pro forma information. The remainder of the
acquisitions, individually and in the aggregate, was not material to our operations. The acquisitions were funded primarily from operating cash
flow, debt and the issuance of common stock.
54